Discussion:FET credit. Must report as earnings for 2007

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Discussion Forum Index --> Tax Tips --> FET credit. Must report as earnings for 2007

Imacat (talk|edits) said:

14 January 2007
Don't celebrate the FET refund by spending it all. If you read the instructions for form 8913, you will learn that you must also claim interest (based on the dates you were billed the FET amounts per the factors shown in the instructions). Plus you will read that you must claim the base amt of your FET tax refund as earnings for 2007 (even though it was included in your total earnings for 2003 through 2006 so you have already paid income tax on it as earnings). And you also must include the interest amt as interest income for 2007. Be aware that the higher tax on the additional total earnings this will give you for 2007 would more than wipe out the interest plus a chunk of the base refund amount for the FET tax credit -- if the additional "earnings" puts you in a higher tax slot in the tax tables for 2007.

PGattoCPA (talk|edits) said:

3 February 2007
I'm not sure what you think the FET is, but it was the federal excise tax that was a deduction for businesses in 2003 - 2006 (and prior as well, but the period you mention is the 8913 period).

You say it was included in earnings so "you have already paid income tax on it as earnings." This is completely incorrect.

Additionally, you are mixing up individuals who never took the deduction for the taxes paid (and therefore do not include the credit as income) with businesses who did take the deduction and who do have to take the credit into income. Taking the credit into income, however, is not a double inclusion of income it is merely wiping out the past deduction.

This post shows a complete misunderstanding of the situation. I'm sure tax professionals are ignoring this post. If any non-tax professionals stumble upon it, ignore it as well. Go to the main forum "Tax Questions" and search for telephone excise tax there.

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